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Archive for January 30th, 2008

Valance Weekly Economic Reports: Global News Highlights

Posted by Sada Mosler on 30th January 2008

Same twin themes taking hold – weakness and inflation.

Highlights:
US Mixed data
EU Softening data could change ECB’s inflation rhetoric
JN CPI Higher on food, energy prices; Mixed data continues
UK Housing Market Continued To Show Weakness
AU Businesses Less Confident About Q1 economic outlook

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Saudi production up to 9.2 mbpd

Posted by Sada Mosler on 30th January 2008

Opec reported Saudi production was up to 9.2 million bpd.

This means demand has increased at the current posted prices probably making further price hikes are more likely than not.

Bloomberg should have updated production numbers around February 5 for confirmation.


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GDP/ADP

Posted by Sada Mosler on 30th January 2008

From Karim:

  • GDP slows from 4.9% to 0.6%
  • Personal consumption slows from 2.8% to 2.5%
  • DGO strength in Dec shows up in modest positive in equipment and software (+3.8%)
  • Residential FI (housing) down 23.9%
  • Core PCE up 2.7% annualized for quarter and 2.1% y/y
  • Net exports add 0.4% to gwth
  • Inventories a drag by 1.25%
  • Inventory/shipment ratio still at recent highs, so unlikely that inventory drag is over yet
  • ADP gain of 130k signals upside risk to consensus 65k advance in nfp; while usually reliable, adp has also had some spectacular misses
  • In light of decline in jobs hard to get component of conference board survey and adp, will call for 90k gain in nfp Friday.
  • Pretty long period between jan and march fed meetings (next meeting march 21). So by next meeting, will have 2 nfp reports to look at as well as decent idea on Q1 gwth. Bernanke testimony likely on 2/27.

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2008-01-30 US Economic Releases

Posted by Sada Mosler on 30th January 2008

2008-01-30 MBAVPRCH + 4 Wk Ave + 12 Wk Ave

MBAVPRCH Index + 4 Wk Ave + 12 Wk Ave

From Karim:
very volatile series-see chart-white line is purchase index-purple line is 4wk avg and green line is 12wk avg-latter is probably best indicator of trend and looks like still heading lower. Of course this series also reflects multiple applications for same home purchase, which is more likely over the past few months in light of tighter standards for many borrowers, so probably have to adjust for that compared to same series a year ago.


2008-01-30 MBAVREFI

MBA Refinancing Index (Jane 25)

Survey n/a
Actual 5103.6
Prior 4178.2
Revised n/a

Refi index positive for ‘market functioning’, but purchase index could be softening.

As before, winter housing numbers are volatile.


2008-01-30 ADP Employment Change

ADP Employment Change (Jan)

Survey 40K
Actual 130K
Prior 40K
Revised 37K

Not the stuff of recession. While not a reliable predictor of Friday’s payroll report, it is a ‘real’ number as it’s ADP’s report of 392,000 business it services.


2008-01-30 GDP Annualized

GDP Annualized (4Q A)

Survey 1.2%
Actual 0.6%
Prior 4.9%
Revised n/a

Lower than expected but still positive, consumer up 2% which is far from recession, and final sales for domestic purchases were up 1.4%, and the Dec export number won’t be reported until Feb 14. The durable goods number yesterday may portend a higher than estimated export number for the next Q4 GDP revised report. Inventories were burned off by 1.25% of GDP, which is also generally not indicative of recession.


2008-01-30 Personal Consumption

Personal Consumption (4Q A)

Survey 2.6%
Actual 2.0%
Prior 2.8%
Revised n/a

Down but not terrible, and not the stuff of recession


2008-01-30 GDP Price Index

GDP Price Index (4Q A)

Survey 2.6%
Actual 2.6%
Prior 1.0%
Revised n/a

Not good.


2008-01-30 Core PCE QoQ

Core PCE QoQ (4Q A)

Survey 2.5%
Actual 2.7%
Prior 2.0%
Revised n/a

Very troubling to the Fed. Mainstream theory says you can’t let core elevate. The cost to bring it down is much higher than any possible losses due to near term weakness caused by keeping rates high.


2008-01-30 FOMC Rate Decision

FOMC Rate Decision (Jan 30)

Survey 3.0%
Actual 3.0%
Prior 3.5%
Revised n/a

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U.K. mortgage approvals drop to least since 1999

Posted by Sada Mosler on 30th January 2008

U.K. Mortgage Approvals Drop to Least Since 1999

By Jennifer Ryan

(Bloomberg) U.K. mortgage approvals dropped in December to the lowest in at least nine years, and consumer credit fell, threatening the outlook for economic growth.

Lenders granted 73,000 loans for house purchase, down from 81,000 in November and the least since records began in January 1999, the Bank of England said in London today. The median forecast in a Bloomberg News survey of 24 economists was 79,000. Lending on personal loans and overdrafts fell to 265 million pounds ($530 million), the least in 15 years.

Banks are tightening credit standards after contagion from the U.S. subprime mortgage market collapse, the Financial Services Authority said yesterday. Less access to credit for Britons with record debt may further slow consumer spending and a weakening housing market, adding to the case for an interest rate reduction by the Bank of England as soon as next week.

“The household sector was clearly under some kind of pressure at the end of 2007,” James Shugg, an economist at Westpac Banking Corp. in London, said in an interview on Bloomberg Television. “The U.K. housing market is embarking on a much slower growth period.” He predicted further interest rate reductions after a quarter-point cut last month.

In a separate statement, Prime Minister Gordon Brown reappointed central bank Governor Mervyn King to serve another five-year term. King accepted the position, saying in a statement that he looks “forward to working hard with my bank and MPC colleagues on the economic and financial challenges that face us all.”

Consumer Credit
The central bank’s report today showed consumers borrowed less on unsecured credit as they faced repaying a record 1.4 trillion pounds in debt and banks curbed lending to them. Net consumer credit fell to 557 million pounds in December, less than half the previous month’s total.

“A significant minority of consumers could experience financial problems because of their high levels of borrowing,” the FSA, the U.K.’s financial regulator, said in its risk outlook report yesterday. “A growing number of consumers are likely to experience debt repayment problems in 2008.”

The average cost for a fixed-rate mortgage maturing in the next 12 months and switching to a variable rate will rise by about 210 pounds per month, creating a “serious impact on the affordability of the loan,” the FSA said. The increase will affect about 1.4 million home loans.

Subprime Losses
Britons face higher home loan costs after banks around the world posted at least $133 billion in losses from the collapse of the U.S. subprime mortgage market.

The average rate offered by lenders on a mortgage for 95 percent of the price of a property, fixed for 24 months, rose to 6.53 percent in December from 6.44 percent, the central bank said Jan. 10. The central bank’s credit conditions survey showed banks plan to limit access to all debt in the first quarter.

“There is a risk that some consumers could find it difficult to meet their credit commitments due to tighter lending standards for both secured and unsecured credit,” the FSA said.

All 30 economists in a Bloomberg News survey forecast the Bank of England will cut interest rates a quarter point to 5.25 percent on Feb. 7 as growth slows and the housing market stalls.

U.K. retail sales rose at the slowest pace in 14 months in January, the Confederation of British Industry said yesterday.

House prices fell for a fourth month in January, Hometrack Ltd. said Jan. 28. U.K. real estate professionals said December was the worst month for the housing market since the aftermath of Britain’s last recession in 1992, according to a Jan. 16. report by the Royal Institution of Chartered Surveyors.


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